Both Labour and the Conservatives have failed to grasp that there is a huge
public appetite for cutting government spending, says Janet Daley.

So which kind of "tough choices" do you fancy? The ones that involve spending – as in, which bits of government expenditure would you choose to cut – or the ones that mean tax rises? You may as well start thinking about this because those will be the options available to you at the next general election.

The outlines of the parties' campaigns have now become clear. Labour, whoever is leading it, will be fighting the last war: trying to revive the demonic vision of "Tory cuts", as if they were somehow more fearsome than the Labour cuts that are already in the pipeline simply by virtue of being Conservative and hence inherently evil. But what even Labour spokesmen will be forced to admit, as indeed some of them did last week, is that – in the absence of serious spending reductions – the only way to fill the cavernous hole in the public finances will be through substantial tax rises. So while both parties will talk of having to make "tough decisions" – which is to say, of you having to endure some unpleasantness – they will mean rather different things by it.

Of the two, Labour is being the more dishonest, but the Conservatives (who should have the stronger case) are being more cowardly. Labour, as has now been demonstrated with unassailable mathematical evidence, is speaking blatant untruths when it implies that it intends no cutbacks in government spending. The only grounds on which it can make any sort of case that its cuts would be less severe than those of the Conservatives would be by conceding that it would raise taxes in order to maintain higher expenditure levels. Higher taxes are the hidden premise in the otherwise incredible logic of the Labour argument.

The Conservatives, for some bizarre reason, have allowed themselves to be terrorised like credulous children in a darkened room, by Labour going "Whooo, whooo, Tory cuts are coming to get you." Message to David Cameron: nobody is afraid of spending cuts any more. People do not run and hide when they hear that a big, bad political leader is coming with a surgical knife. They offer him a list of suggestions for where he might like to start operating. Everybody has his favourite candidates: local council gender equality outreach officers, entire tiers of hospital trust managers, swaths of Whitehall public liaison staff.

This is not 1997. The public has got it. Gordon Brown has tested to destruction the theory that spending more and more on public services necessarily improves them. The voters now find the idea of swearing an oath that you won't cut government spending not only preposterous at a time of such terrifying national debt but positively exasperating. Amazingly, they do not even believe that NHS spending – which both Labour and, more annoyingly, the Tories believe to be the absolutely untouchable object of public veneration – should be protected from cuts. A poll for the PoliticsHome website last week showed that fully two thirds of those asked (including a majority of Labour supporters) believed that health spending should not be protected from cuts. So Labour is really on a downer here. And there is no reason on earth – apart from sheer bloodymindedness – for the Tories to stick to the same line.

If politicians of all parties were not terrified of the NHS lobbies – the public sector unions and the Royal Colleges – they would admit that the idea of a purely tax-funded health care system, given an ageing population and never-ending advances in medical treatment, is no longer sustainable. For Labour to succumb to this blackmail may be understandable, given their financial dependence on the unions and their historical links with the NHS, but for the Tories to be pulled into the same trap is simply crazy: it deprives them of an opportunity to appear honest, sensible and in tune with genuine public feeling.

This is the moment – since the country is long past the bogeyman stage – to open up the debate on health care as they have on education: to say there are lots of alternative ways to fund the service that involve bringing in new streams of finance, from insurance systems to the non-profit voluntary sector.

These would not only have the virtue of relieving the pressure on the taxpayer but they would disseminate control of these services outward from central government. Health and schooling, as has been voluminously documented in the experience of other countries, can be free at the point of use without being paid for entirely out of taxation.

Most important, the argument about government spending and whether or not it should be reduced is really about state power: the more the government spends (the more it is entrenched as a monopoly provider of essential services), the more power it has over the lives of the citizenry. And conversely, the more diverse the funding and supply of services, the more power is devolved to a wide variety of people.

Which brings us to the issue of tax rises. The more of their earnings that people can decide to spend (or save) themselves, the more power and freedom they have. So a government that taxes more in order to spend more is depriving people of freedom and responsibility twice over: first by confiscating a higher proportion of the earnings with which they might have been able to make their own spending decisions, and then by reserving for itself the power to organise and dispense the services that are most vital to their quality of life. So if Mr Cameron and his friends really, really want to talk People Power, here is a perfect arena: finding diverse ways to provide and fund public services that would be responsive to the needs of individuals and communities could be more efficient, more productive and more genuinely empowering than the monstrously expensive, over-centralised megaliths that Labour will fight to the death to protect. And they would allow the taxpayer to keep more of his own money, which would further increase his freedom and his personal sense of responsibility. What's not to like?

Trust me: nobody is afraid of contemplating spending cuts any more except the axe-grinding vested interests. But almost everybody is infuriated by the prospect of tax rises. So when Mr Brown hurls his rhetorical question across the floor of the House of Commons, "Which services are you going to cut?", instead of quaking (or lamely insisting that Labour would have to make cuts, too), Mr Cameron should respond by roaring back: "Which taxes are you going to raise?"